Despite the weakening seen in recent days, the forint can be proud of its performance this year

The foreign exchange markets are over several interest rate decisions, the most important of which at the international level were the European Central Bank’s decision last week and the US Fed’s decision on Wednesday. Both central banks kept the base rate unchanged, and these decisions are also important for regional currencies.

Since last Friday, the forint has performed the worst, weakening by 0.8 percent against the euro. In contrast, the Polish zloty lost 0.5 percent and the Romanian leu lost 0.1 percent of its value against the euro, while the Czech koruna remained stable, according to a compilation by Dávid Németh, K&H’s chief analyst.

“The whole picture is that although the Hungarian currency has weakened the most in recent days among regional currencies, it can boast the best result this year, as it has strengthened by 3 percent against the euro since the beginning of January. At the same time, the Czech koruna has only strengthened by 2.5 percent, while the Polish zloty has strengthened by 0.2 percent, and the Romanian leu has weakened by 2 percent over the same period,”

the expert said.

According to the analyst, the current forint weakening is partly due to the fact that Fed Chairman Jerome Powell has formulated messages with a slightly stricter tone than expected. Thus, the chance of a September interest rate cut has fallen from 70 percent to roughly 40 percent. This has caused the dollar to strengthen in the market, and its exchange rate against the euro has reached a level not seen in a month and a half. “This change also weakened regional currencies. The underperformance of the forint is partly due to the fact that energy prices, including oil and gas, have risen. This market movement can be linked to US President Donald Trump’s peace ultimatum to Russia. Potential sanctions could also negatively affect Hungary, which has a high import exposure in this area. A possible permanent increase in energy prices would worsen Hungary’s foreign trade balance,” the expert said.

When risk aversion intensifies in international markets, a country’s public debt level and credit rating receive more attention, and in this regard, Hungary is considered riskier within the region.